Managing, documenting reseller compliance makes business sense

June 1, 2012 By    

Your business is insured and your safety policies are in compliance, but what about resellers, who retail or distribute your products?

Recent liability allegations, settlements and judgments have held wholesalers and suppliers accountable for communicating basic information related to duty to warn, employee training, OSHA training and code compliance to retail vendors of their products.

In other words, what did you sell them besides regular loads of propane? Can you demonstrate that you made an effort to warn or ask resellers for documentation of compliance?

Suppliers and wholesalers are most often targeted when reseller insurance limits are deemed inadequate in relation to costs of claim settlement. Such scenarios often trigger investigations into the efforts made by suppliers and wholesalers to educate and document reseller compliance.

For example, let’s say you as a marketer have a wholesale relationship with a retail cylinder filling operation. You supply the propane; they fill cylinders for the public. One day you get a call about an explosion that killed an employee, injured several customers and caused significant property damage to both buildings and vehicles.

There are going to be lots of questions. Will you have the answers?

While it is important to note that all businesses retailing propane, including resellers, are responsible for their own compliance with regard to duty to warn, employee training and code compliance, it makes good business sense for suppliers and wholesalers to require documentation that resellers are in compliance and carry adequate insurance limits.

One of the best ways to secure documentation would be to supply the reseller with a copy of PERC’s Dispensing Propane Safely employee training program.

This one product does an excellent job of covering the most important issues related to dispensing propane. That said, the issues of compliance and documentation are critical to the supplier/wholesalers’ ability to demonstrate an effort to hold resellers accountable for their own compliance.

I usually recommend to clients that they utilize some form of contract with the reseller that spells out their obligations as a requisite for supply. An annual review of compliance and documentation of training both current and new employees can go a long way toward verifying reseller follow-through on obligations.

Such agreements should include the requirement of an annual certificate of insurance naming the supplier as an additional insured. The required liability limit of resellers should reflect your company’s comfort with the buffer between their limit and yours.

Lastly, I want to stress the importance of consistency. Once you commit to such documentation, it is important to be consistent with regard to implementation and execution.

Areas where I commonly see reseller failure to comply include:
• Failure to train new employees
• Failure of employees to wear personal protection equipment – including gloves and protective eyewear
• Failure to inspect cylinders for certification
• Failure to utilize and maintain a cylinder rejection logbook
• Failure to remove cylinder sleeves to inspect tank for excessive corrosion
• Failure to provide new sticker with safety information after sleeve removal
• Failure to distribute safety material such as the Important Information for Users of Small Cylinders Brochure

Getting back to our example of a potential claim, let’s assume that the employee who filled the tank did not wear gloves or protective eyewear, did not inspect the cylinder (which was out of compliance), did not remove the sleeve for inspection of the cylinder or replace the safety sticker and provided no safety information to the customer. Certainly his training will come into question.

Regardless of origin and cause – especially in an incident that involves death, bodily injury and significant property damage – the cost of claims may exceed resellers’ insurance limits. Other issues such as OSHA violations and fines may accelerate the cost of the claim.

One question that is always the elephant in the room regarding liability: Who has the money? Once the underlying vendor insurance limits have been exhausted, your wholesale/supplier liability exposure may be relative to your efforts to document safety communication with your reseller.

This summer, millions of grill cylinders will be filled by thousands of resellers. Now is the time to review your documentation of training and certified compliance. Failure to do so could jeopardize insurance limits and earned profits alike.

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